United States District Court, E.D. Arkansas, Western Division
JACQUELINE ESRY, Individually and on Behalf of all Others Similarly Situated PLAINTIFF
P.F. CHANG'S CHINA BISTRO, INC. DEFENDANT
OPINION AND ORDER
LEON HOLMES UNITED STATES DISTRICT JUDGE
case is about the Little Rock P.F. Chang's payment
practice s with respect to its servers. Jacqueline Esry and
several opt-in plaintiffs worked as servers for P.F.
Chang's in Little Rock, where they received a tipped rate
of $2.63 an hour from P.F. Chang's as well as tips. The
plaintiffs claim the restaurant wrongly paid them the tipped
rate for time that they should have been paid minimum wage.
They argue that P.F. Chang's required servers to spend
substantial time on work that by itself does not generate
tips, such as rolling silverware or cleaning tables after
customers have finished dining. By doing so P.F. Chang's
violated the Fair Labor Standards Act and the Arkansas
Minimum Wage Act, they say, and they seek among other things
backpay and liquidated damages under both
Chang's contends that it did nothing wrong by paying Esry
and other servers the tipped rate for all their hours worked.
It points out that P.F. Chang's undisputed practice was
to ensure the servers received at least the applicable minium
wage if, in a given workweek, that server did not earn
sufficient tips to cover the tip credit. The servers
therefore undisputably effectively received at least the
hourly minimum wage, in accordance with the FLSA. P.F.
Chang's moves for summary judgment on Esry's claims.
For the reasons that follow, the motion is denied.
requires employers to pay employees a minimum hourly wage,
which is currently $7.25 per hour. 29 U.S.C. §
206(a)(1)(C). But an employer generally may take a “tip
credit” by paying “tipped employees” a
lower “tipped rate” instead of minimum wage - so
long as the employees receive enough tips to make up the
difference between the tipped rate and minimum wage.
Id. § 203(m). A “tipped employee”
is an “employee engaged in an occupation in which he
customarily and regularly receives more than $30 a month in
tips.” Id. § 203(t).
that there are situations in which employees have more than
one occupation under one employer-some occupations that are
tipped and some that are not-the Department of Labor, tasked
with enforcing the FLSA, promulgated a “dual
jobs” regulation interpreting and implementing the tip
credit. See 29 C.F.R. § 531.56(e). It provides
the example of a maintenance man who also serves as a waiter.
Id. Such an individual must receive the full minimum
wage “for his hours of employment in his occupation of
maintenance man, ” which does not generate tips, but
may be paid as a “tipped employee” with respect
to his employment as a waiter (so long as he customarily and
regularly receives $30 a month in tips). Id. The
regulation then explains:
Such a situation is distinguishable from that of a waitress
who spends part of her time cleaning and setting tables,
toasting bread, making coffee and occasionally washing dishes
or glasses. It is likewise distinguishable from the
counterman who also prepares his own short orders or who, as
part of a group of countermen, takes a turn as a short order
cook for the group. Such related duties in an occupation that
is a tipped occupation need not by themselves be directed
toward producing tips.
Id. The Court defers under Chevron to this
regulation because the statute is ambiguous. See Fast v.
Applebee's Intern., Inc., 638 F.3d 872, 878-79 (8th
Cir. 2011) (stating that “we owe Chevron
deference” to the regulation; as in the FLSA Congress
“did not define ‘occupation' or address the
possibility of an employee working more than one occupation
for the same employer, ” nor did it define
“engaged in an occupation”).
Department of Labor Wage and Hour Division has further
interpreted the ambiguous regulation in a “Field
Operations Handbook, ” which “provides WHD
investigators and staff with interpretations of statutory
provisions, procedures for conducting investigations, and
generally administrative guidance.” See Index
to Field Operations Handbook, Wage and Hour Division, United
States Department of Labor, available at
https://www.dol.gov/whd/FOH/index.htm (last visited March 11,
2019). According to the Department's website, the
handbook “is not used as a device for establishing
interpretive policy.” Id.
February 15, 2019, the Handbook explained that an employer
could take the tip credit “for time spent in duties
related to the tipped occupation, even though such duties are
not by themselves directed toward producing tips, provided
such related duties are incidental to the regular duties of
the tipped employees and are generally assigned to the tipped
employee.” See Document #49-6 at 5. The
Handbook did not define “related duties, ” but it
gave the example of a server “who does preparatory or
closing activities, rolls silverware and fills salt and
pepper shakers while the restaurant is open, cleans and sets
tables, makes coffee, and occasionally washes dishes or
glasses.” Id. The Handbook then provided:
(3) However, where the facts indicate that tipped employees
spend a substantial amount of time (i.e., in excess of 20
percent of the hours worked in the tipped occupation in the
workweek) performing such related duties, no tip credit may
be taken for the time spent in those duties. All related
duties count toward the 20 percent tolerance.
(4) Likewise, an employer may not take a tip credit for the
time that a tipped employee spends on work that is not
related to the tipped occupation. For example, maintenance
work (e.g., cleaning bathrooms and washing windows) are not
related to the tipped occupation of a server; such jobs are
non-tipped occupations. In this case, the employee is
effectively employed in dual jobs.
Fast, the Eighth Circuit held that the
Department's interpretation of the regulation as
contained in the Handbook was “reasonable, persuasive,
and entitled to deference.” Fast, 638 F.3d at
874 (citing Auer v. Robbins, 519 U.S. 542, 461, 117
S.Ct. 905, 137 L.Ed.2d 79 (1997)). The Fast court
explained that deferring under Auer was appropriate,
rather than using the lesser Skidmore deference,
because the regulation gave specificity to the FLSA statutory
scheme rather than merely parroting the statute and the
regulation reflected the considerable experience and
expertise of the Department of Labor. Id. at 878-79.
Moreover, the regulation itself is ambiguous - further
supporting Auer deference - because it does not
address an employee performing related duties more than
“part of the time” or more than
“occasionally.” Id. at 879. Because
Auer deference applied, the Eighth Circuit explained
that “[t]he DOL's interpretation of §
531.56(e) is therefore ‘controlling unless plainly
erroneous or inconsistent with the regulation.'”
Id. (quoting Auer, 519 U.S. at 461, 117
Eighth Circuit deferred to the Handbook's
“twenty-percent rule” or “80/20
rule.” According to the Fast court, based on
the terms “part of [the] time” and
“occasionally, ” the regulation itself
“clearly places a temporal limit on the amount of
related duties an employee can perform and still be
considered to be engaged in the tip-producing
occupation.” Id. The court also explained that
a temporal limitation is consistent with other court
decisions addressing similar issues. For example, a server
who spends an entire shift as a “salad preparer”
should not be included in a tip pool and paid the tipped
rate. Id. at 880 (citing Myers v. Copper Cellar
Corp., 192 F.3d 546, 549-50 (6th Cir. 1999)).
Ultimately, the Fast court concluded that the
Department's twenty-percent threshold as contained in the
Handbook was “not inconsistent with § 531.56(e)
and [was] a reasonable interpretation of the terms
‘part of [the] time' and ‘occasionally'
used in that ...